8-K: DNOW Inc. Reports Record Full-Year EBITDA and Strong Fourth Quarter Results

DNOW Inc. announced strong fourth quarter and full-year 2023 results, highlighted by record EBITDA and significant free cash flow generation.

Summary

• DNOW Inc. reported its fourth quarter and full-year 2023 financial results on February 15, 2024.
• The company's fourth-quarter revenue was $555 million.
• Net income attributable to DNOW Inc. for the fourth quarter was $147 million, or $1.35 per diluted share, which included a $126 million non-cash deferred tax benefit.
• Excluding other costs, non-GAAP net income was $24 million, or $0.22 per diluted share, for the fourth quarter.
• EBITDA excluding other costs was $44 million, or 7.9% of revenue, for the fourth quarter.
• For the full year, revenue grew by $185 million, or 9%, reaching $2.321 billion.
• Full-year EBITDA excluding other costs was $184 million, a record for the company since becoming public, representing 7.9% of revenue.
• The company generated $171 million in free cash flow for the year, exceeding their original guidance.
• DNOW is targeting to generate $150 million in free cash flow in 2024.
• The company also announced an agreement to acquire Whitco Supply.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to record EBITDA, strong free cash flow, and a strategic acquisition. The company's financial performance is strong, and management's comments are optimistic.

Positives

• DNOW Inc. reported a strong fourth quarter finish, capping off a stellar year.
• The company achieved record EBITDA since becoming a public company.
• U.S. Process Solutions delivered significant full-year double-digit revenue growth in several business units.
• The company generated strong free cash flow, exceeding original guidance by more than double.
• DNOW has a strong balance sheet with significant cash and no long-term debt.
• The acquisition of Whitco Supply is expected to enhance earnings, free cash flow, and shareholder value.

Negatives

• Non-GAAP net income for the fourth quarter was $24 million, significantly lower than the GAAP net income of $147 million due to a large non-cash deferred tax benefit.
• The company's non-GAAP diluted earnings per share for the fourth quarter was $0.22, lower than the GAAP diluted earnings per share of $1.35.

Risks

• The company's forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially.
• The company's results are subject to fluctuations in the energy and industrial markets.

Future Outlook

DNOW is targeting to generate $150 million in free cash flow in 2024 and expects the acquisition of Whitco Supply to enhance earnings, free cash flow and shareholder value.

Management Comments

• David Cherechinsky, President and CEO of DNOW, stated he was excited by the strong fourth quarter finish, capping off another stellar year.
• He highlighted the record EBITDA performance since becoming a public company.
• He also mentioned the significant full-year double-digit revenue growth in several U.S. Process Solutions businesses.
• He expressed his excitement about the agreement to acquire Whitco Supply.

Industry Context

DNOW operates in the energy and industrial products sector, and its results reflect the current market conditions and demand for its products and services. The acquisition of Whitco Supply suggests a strategic move to expand market share and enhance its offerings.

Comparison to Industry Standards

• DNOW's EBITDA margin of 7.9% is a key metric to compare against its peers in the energy and industrial distribution sector.
• Companies like MRC Global and Fastenal are comparables in the distribution space, and their financial results and margins would be relevant for benchmarking.
• The free cash flow generation of $171 million is a strong performance, and it would be useful to compare this against the cash flow generation of similar companies.
• The double-digit growth in specific U.S. Process Solutions businesses is a positive sign, and it would be beneficial to compare this growth against the growth rates of competitors in those specific segments.

Legal Proceedings

• The company incurred legal fees related to litigation matters that were not ordinary or routine to the operations of the business where the Company is seeking damages.

Stakeholder Impact

• Shareholders are likely to react positively to the strong financial results and the acquisition of Whitco Supply.
• Employees may be positively impacted by the company's growth and success.
• Customers may benefit from the enhanced offerings and capabilities resulting from the acquisition.
• Suppliers may see increased business opportunities due to the company's growth.

Next Steps

• The company will hold an earnings conference call on February 15, 2024.
• A presentation titled 'DNOW Fourth Quarter and Full-Year 2023 Key Takeaways' will be available on the company's Investor Relations website.
• The company will focus on integrating Whitco Supply and achieving its 2024 free cash flow target of $150 million.

Key Dates

Keywords

EBITDA, free cash flow, revenue, net income, earnings, DNOW, Whitco Supply, acquisition, energy, industrial products